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Hong Kong SAR, China

Foreign Direct Investment

Global foreign direct investment (FDI) flows in 2021 were USD 1.58 trillion, up 64 per cent from the exceptionally low level in 2020. The recovery showed significant rebound momentum, with booming merger and acquisition (M&A) markets and rapid growth in international project finance because of loose financing conditions and major infrastructure stimulus packages. However, the global environment for international business and cross-border investment changed dramatically in 2022. The war in Ukraine – on top of the lingering effects of the pandemic – is causing a triple food, fuel and finance crisis in many countries around the world. Investor uncertainty could put significant downward pressure on global FDI in 2022. The 2021 growth momentum is unlikely to be sustained. Indeed, world flows in the second quarter of 2022, the latest data available, were down 31% from the first quarter and 7% less than the quarterly average of 2021 (UNCTAD Global Investment Trends Monitor, October 2022). The negative trend reflects a shift in investor sentiment due to the food, fuel and finance crises around the world, the Ukraine war, rising inflation and interest rates, and fears of a coming recession. Expectations for the full year are for a marked slowdown. In developing Asia, despite successive waves of COVID-19, FDI rose to an all-time high for the third consecutive year, reaching $619 billion. Asia is the largest recipient region, accounting for 40 per cent of global FDI. However, inflows remain highly concentrated; six economies account for more than 80 per cent of FDI to the region (UNCTAD, October 2022).

According to the 2022 World Investment Report released by UNCTAD, Hong Kong received USD 134.71 billion of FDI in 2020, over 82.7% more than in 2019 (USD 73.71 billion), driven mainly by an increase in intracompany loans and reinvested earnings. This amount topped USD 140.69 billion in 2021. While representing a small share of FDI, the rebound in cross-border M&A sales to USD 11 billion (from USD 1 billion in 2019) also contributed to this increase, thanks to many cases of Chinese MNEs consolidating affiliates in Hong Kong. Given the economy's sizeable intra-company flows and its close ties with China, which contributes 28% of its FDI stock, the rise in FDI in Hong Kong reflects corporate restructuring, particularly by Chinese multinationals, rather than new investment. It ranks 6th in terms of FDI inflows in 2021. It was also the seventh largest countryin the world in terms of FDI outflows, registering USD 87.45 billion in 2021. The stock of FDI reached USD 1 851 billion in 2020 and over 2 022 billion in 2021. Hong Kong is a hub for foreign MNEs' regional headquarters, inflows were mostly invested in services sector operations (including regional headquarters and finance functions that facilitate indirect FDI flows). The main investing countries are China, the British Virgin Islands, the United Kingdom, Bermuda and Japan. The vast majority (around three-quarters) of investments are intended for financial activities: holding, real estate, finance, insurance, banking, etc.

Hong Kong is attractive due to several strong factors: its strategic position (it is a gateway to the Chinese market), its status as a free port; its simple tax system that provides many incentives, good infrastructure and judicial security. Hong Kong has one of the world’s best regulatory systems for paying taxes.

The latest United NationAsia-Pacific Trade and Investment Trends Report provides additional information on FDI in Hong Kong and Asia-Pacific in 2022 and 2023.

Foreign Direct Investment 202020212022
FDI Inward Flow (million USD) 134,710140,186117,725
FDI Stock (million USD) 1,851,4641,957,3652,090,558
Number of Greenfield Investments* 88101113
Value of Greenfield Investments (million USD) 2,2863,8502,917

Source: UNCTAD - Latest available data.

Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.

Country Comparison For the Protection of Investors Hong Kong SAR, China East Asia & Pacific United States Germany
Index of Transaction Transparency* 10.0 5.9 7.0 5.0
Index of Manager’s Responsibility** 8.0 5.2 9.0 5.0
Index of Shareholders’ Power*** 9.0 6.7 9.0 5.0

Source: Doing Business - Latest available data.

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.


What to consider if you invest in Hong Kong SAR, China

Strong Points

Hong Kong is an international leader in terms of international trade, a services centre with high added value and the bridgehead to one of the largest production bases in the world, China. Hong Kong has a sound economy and a stable and efficient financial and banking system. Key strong points for FDI in Hong Kong include:

  • Favourable tax measures
  • The transparency of local institutions 
  • Freedom of information 
  • Availability of qualified human resources  
  • Its advantageous geographical location in Asia
Weak Points

Disadvantages for FDI in Hong-Kong include:

  • High cost of property and work space (offices, shops, etc.)
  • High cost of salaries, compared to other Asian countries such as Mainland China and India
  • The excessive importance of the financial sector in national economy
Government Measures to Motivate or Restrict FDI
Hong Kong is a free territory for investments, which are in fact encouraged by the government with a favourable taxation policy and light legislation. Foreign companies can be set up freely, register their brands and the director of the company doesn't have to be a citizen nor a resident of Hong Kong. The government has also put in place numerous initiatives to support business innovation.


Investment Opportunities

The Key Sectors of the National Economy
The service sector has a very significant role in the economy of Hong Kong (89% of GDP).
Business services, retail, information and communication technologies, electronics and biotechnology, tourism and transportation are sectors that, in addition to being already highly established, have strong potential.
High Potential Sectors
In order to pursue economic development towards greater diversification, the government has set priorities for development: medicine (assistance to the disabled and the elderly), education, environmental technologies, tourism and innovative services are thus sectors with strong development potential.
Privatization Programmes
Private companies already operate all major utilities in Hong Kong under an agreement framework with the local government, except for water.
Tenders, Projects and Public Procurement
HK Government, Trace E-Gov
Tenders Info, Tenders in Hong Kong
DgMarket, Tenders Worldwide

Sectors Where Investment Opportunities Are Fewer

Monopolistic Sectors
There are only two electricity suppliers: Hongkong Electric and China Light and Power; while Towngas is the country’s only gas supplier.
Sectors in Decline
Hong Kong is an economy based on services, thus the manufacturing sector's contribution to GDP has always been modest and has been decreasing in recent years.
The tourism sector has been suffering in 2019 due to sustained political protests, and the situation worsened in 2020 and 2021 amid the COVID-19 pandemic.